A growth practitioner is someone that practices the strategy of making small experimental improvements every day.
How are you defining growth?
Is it an increase in clients? Is it new users or is it higher retention?
Who’s responsible for this growth? The CEO? CTO? Marketing? Product?
And why do only a small subset of companies experience significant growth?
In 1955, the average life expectancy of a Fortune 500 firm was 75 years. It now stands at 15 years.
How did Amazon become Amazon? How did Apple become Apple?
How did IBM and Unilever avoid extinction?
As difficult as it is to answer these questions, you might start by stating each company has an amazing product. You might point out the qualities of the founder, or the fact the company focused on a single product in a niche market. You might say they truly found product-market fit or the fact they have an unbeatable experience.
Honestly, it seems like we all have the textbook answer, but how come so few pull it off?
To help us understand this new environment, let’s turn back the time.
It’s September 2007 and Airbnb founders Brian Chesky and Joe Gebbia are living in an apartment in San Francisco but with one small problem — they can’t afford their rent.
So like typical people, they decide to turn their space into a living area. In October 2007, their first guests pay $80 each to stay on air mattresses. At that point, they feel they have something and start developing an idea with the help of their old roommate, Nathan Blecharczyk.
Still strapped for cash in August 2008, the friends come up with an idea to raise money by selling Barack Obama and John McCain cereal boxes in the runup to the elections. They sell $30,000 worth of boxes.
However, a few months go by and they’re back at square one — still in debt and with no real business. At the time known as AirBed and Breakfast, the company focused on providing living space (essentially air mattresses) to folks attending large conferences in certain cities.
During an interview with Reid Hoffman, Brian recalls the team making pivotal adjustments based on customer feedback — right before the official third launch of the company.
Customer: “I want to go to London but there’s no conference.”
Brian, Joe, and Nathan (to themselves): “Why does this have to be for conferences?”
NOTE: At the time, Airbnb required you to use an air mattress.
Customer: “Why am I putting air beds on my mattress, it’s so uncomfortable!”
After realizing how uncomfortable it is to have an air bed on top of a mattress…
Brian, Joe, and Nathan: “Okay fine, you may have a real bed.”
After going through Y Combinator, in January 2009 Airbnb was able to gather a $20,000 investment from Paul Graham and $600,000 from other venture capitalists.
This was after Mr. Graham asked, “People are actually doing this?”
After many tests and unconventional experiments (including their now famous Craigslist hack), in February 2011 the company reached 1 million bookings.
By November 2012 Airbnb had over 10 million bookings and had started their international expansion.
Well, there you have it!
The new growth formula…
Does it seem unpromising? That’s because it was!
However, if you look at the stories of countless high growth firms out there, there seems to be a pattern.
While most companies are waiting for the perfect situation to come together — the day engineering builds our new tool, the moment we get our marketing budget, the minute we hire a larger sales team…that’s when our product will go viral, our revenue will skyrocket, every major investor and VC will show up at our doorstep, and we can finally retire somewhere on the Amalfi Coast.
While others believe they have the magic answer, you might be able to systematically find it.
Unlike the situation above, where folks are relying on traditional leverage, you can optimize your probability of success and increase the skills of your team in a measurable way that creates value and is undeniable to your customer.
How can you do this? As the 76ers and Nick Saban have pointed out, “Trust the process.”
Say, what?
I believe the answer lies somewhere in a sustainable process whose underlying principles have stood the test of time.
In my experience, rarely does anyone start out with the magic bullet. You have to put yourself out there, don’t assume anything, start from the very beginning, and approach everything with a long-term perspective. You might fail. In fact, you likely will fail. I’ve failed. Realize, everybody fails though. The difference is how you see it. It’s, in fact, a good thing. If the definition of insanity is doing the same thing over and over but expecting different results — then make sure you’re taking action in a measurable way.
If you can measure it and make adjustments, you’re not failing — no matter the outcome of the experiment. That’s how you make real progress.
Now more than ever, a more holistic approach to growth is required by companies.
Experimentation and creativity are at the heart of the new growth formula.
We’re seeing an explosion of companies looking for these skills. New roles such as VP of Growth, Growth Hacker, Growth Architect, and Head of Growth are becoming prevalent. You’ve probably noticed the plethora of ‘growth’ buzzwords being used and I wouldn’t be surprised if it’s a little confusing (or annoying). But let’s ignore the terminology for a moment and recognize what the most innovative companies are doing…because we’re in new territory.
“Every company needs a growth manager” — Harvard Business Review.
4 key trends to this new growth environment include:
Apart from increased venture capital investment (which goes to a fairly concentrated area still), a key driver of this new environment is the cross-pollination of data and technology.
“It took decades for the telephone to reach 50% of households, beginning before 1900. It took five years or less for cell phones to accomplish the same penetration in 1990.” — The Pace of Technology Adoption is Speeding Up, Rita McGrath
An important question is, why now?
Leading up to this moment, concepts such as the lean startup methodologyby Eric Ries started gaining traction. Not too long after, in 2010 the term growth hacking was first coined by Sean Ellis. Both principles focus on becoming more efficient and using data to derive quick learnings. In the last two decades, we’ve witnessed the exceptional growth stories of companies like Dropbox, Facebook, Pinterest, and Airbnb. The lessons learned are hard to dismiss.
In order to better understand this shift in thinking, it’s worthwhile to mention how companies previous to this were growing. One could argue growth hacking existed early as the 60s when companies like Walmart and McDonalds were rapidly growing. This is likely true — I’d bet there were some smart individuals who were able to look at business growth holistically and used small, clever ways to engineer growth. However, there’s one significant point in our history when something important changed — in the 1990s, the internet appeared.
Pre-internet (pre-1990), capital and labor were the primary methods of leverage. You had traditional marketing agencies run massive campaigns based on the gut or instinct of guys like Don Draper, the fictional character in Mad Men (worth watching btw). This era was about commercials, radio ads, mail, and billboards — the mentality was, ‘build it and they’ll come.’ The growth engine for companies during this time consisted of large sales teams and siloed marketing, IT, and product departments.
However, thanks to the likes of Google, Facebook, Amazon and those mentioned above — that’s all changed now.
We now live in an economy where growth no longer comes after a product is made, rather growth is co-created with the product itself. Digital disruption is creating significant opportunities. Customer choice is influencing how we involve technology. Every industry is being reimagined.
Social, economic, and technology factors are changing the way people behave. The focus has shifted from large sales team and siloed departments to the customer experience and software.
How have companies like Spotify, Lyft, WeWork, and Root Insurance been able to bridge that gap?
— Steven Dupree, Former SoFi/LogMeIn
While customers are demanding new consumption models, companies like those mentioned above are realizing a common thread — growth is the discipline of applying the scientific method to business KPIs (key performance indicators).
From a high level the growth process includes the following steps:
The whole objective is to find the truth, not what you think is the truth. It’s also quite possible you’re making subconscious assumptions and therefore setting up the wrong tests.
Skilled growth leaders like Brian Balfour, Sean Ellis, and Andrew Chen look at the entire customer journey from end to end while keeping a focus on long-term growth. It seems pretty simple but can be quite tricky if the past culture has its way. Even more, you can have short-term growth at the expense of long-term churn. The best growth teams look for sustainable methods to test and iterate with. It’s a continuous process where data and creativity play roles as key catalyst.
The customer journey includes:
A possible scenario in the past (and likely present): Marketing team works on awareness and acquisition. Product team works on activation and retention. Sales handles revenue and referral. Different functions work on different parts of the funnel. This behavior leads to certain parts of the organization to be deprioritized.
To summarize Brian Balfour, the former VP of Growth at Hubspot, the goal is to figure out how all of these layers interact and which levers most impact the growth rate.
The new growth formula requires a blend of engineering, data science, technical marketing, and design. By blending together the capabilities of an engineer, data analyst, marketer, and designer, you’re able to get results faster, cheaper, and more accurately. These skills work together to create a multiplier force on company growth. The specifics might be different based on your problem but the principles around experimentation don’t change.
— Andrew Chen, General Partner @Andreessen Horowitz, previously @Uber
As you’re probably thinking, you can’t do any of this without a great product. Absolutely true. But is your first product going to be the solution customers come to love? Probably not — it’s a process.
What can do right now? Focus on what’s in front of you, the now. The best way to lean into this is by building a sustainable process. A machine, that step-by-step, moves you forward (even if in reality some steps might be backward). Through this process, you can systematically remove unknowns.
You start with what you have and you let your customers decide. Then using the above framework and philosophies, you try to create a radically authentic and meaningful product your customers care to use and want to share with others.
At the end of the day, this new growth formula is more of a shift in mindset than anything. The changes required are a function of the new environment we live in.
Growth takes time but with the right approach, you can mitigate the necessary risks to cultivate an environment ripe for growth.
Apologies for any mistakes or typos. I welcome any feedback or questions. If you enjoyed this article or thought it was helpful, I’d appreciate if you could give it a few claps and shared it with other community members.
